After a few weeks of range bound activity, the E-Mini NASDAQ 100 seems poised for a major breakout opportunity. Here’s why…
Major Compression
The daily chart shows the E-Mini NASDAQ 100 is trading within the boundaries of a highly compressed price range. As it turns out, this price range actually encompasses the year’s trading thus far.
The fact that markets ebb and flow between compression and expansion phases, leads me to believe we’ll likely see a breakout from this trading range soon.
As a matter of fact, the Range Ratio calculation shows the current average 10-day price range is vastly tighter than normal (a reading below 0.75), which is usually a precursor to explosive breakouts and range expansion.
Furthermore, the NQ has formed an Inside Day pattern, whereby the last day’s price range fell within the price range of the preceding session. This pattern usually leads to breakout opportunities, as well.
Targets to Watch
Regardless of direction, a breakout should yield solid results. As a matter of fact, I’m estimating that a move of around 98.25 points could be seen over the upcoming 10 days.
You see, the current average 10-day price range is 78.50 points. When price breaks free from highly compressed ranges, it tends to move a distance of about 125% of the current average multi-day range (78.50 x 1.25 = 98.25). Of course, this is just a Rule of Thumb, but you’d be surprised how accurate this calculation can be.
With resistance being 2,752, and support being 2,700, we’re looking at 10-day targets of 2,850.25 for Bulls and 2,601.75 for Bears. Guess what? The monthly R2 Floor Pivot is sitting at 2,852.25, and the monthly S1 pivot is 2,586.25, which are very close to the MDR calculations above.
Keep in mind, the NQ may continue to churn slowly within the trading range over the next few days. However, once the market sees a worthy catalyst, look for a potentially big breakout opportunity to occur.
FREE Webinar Tomorrow!
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I’ll be discussing my current 2013 Market Outlook, so there will be tons to cover. And be sure to stay awhile, so you can watch them trade the markets live!
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Cheers!
Frank Ochoa
PivotBoss | Own the Market
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